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In the Presence of Bid-Offer Spreads, Outward Arbitrage Comes to an End

Question 25

Multiple Choice

In the presence of bid-offer spreads, outward arbitrage comes to an end when:

A) the difference between the domestic bid interest rate and the foreign offer interest rate is equal to the difference between the forward spread and the bid-offer spread
B) the difference between the domestic offer interest rate and the foreign bid interest rate is equal to the . difference between the forward spread and the bid-offer spread
C) the difference between the domestic offer interest rate and the foreign offer interest rate is equal to the forward spread
D) the difference between the domestic bid interest rate and the foreign bid interest rate is equal to the bid-offer spread

Correct Answer: